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THE S&P IS ON SALE, AND THERE ARE BARGAINS TO BE had among the stock market's lowest-priced issues. To find them, Barron's first screened the Standard & Poor's 500 for stocks trading below $10 a share -- a group that currently numbers roughly 80 issues, or 16% of the index. Most are down more than 50% this year, amid the worst bear market in years.

To separate the potentially troubled from the merely cheap, we then screened for companies likely to increase earnings per share -- even if only by a penny -- in 2009. And, to weed out the dangerously debt-encumbered, we looked for companies with long-term obligations of less than 50% of total capitalization. You'll find the "survivors" -- an eclectic 11 -- listed nearby.

A brutal bear market has left 80 stocks, or 16% of the S&P 500, trading below $10 a share.
Stuart Goldenberg for Barron's

It's easy to see why Kodak is in the single digits; its shares fell about 9% last week, and were trading around 6.60 after the once-mighty film giant withdrew its 2008 guidance for sales and operating earnings, its second warning in six weeks. Kodak has failed to keep pace in a market dominated by digital photography, and cited a weak dollar and global recession for its current troubles. Analysts thought the company could earn 26 cents a share next year, atop earnings of 17 cents this year. Now they expect it to earn 20 cents in 2009.

Still, Kodak's no candidate for a government bailout. It has whittled long-term debt to about 22% of total capital, and generates enough cash to pay a dividend of 50 cents a share, for a yield of 6.9%. The stock looks expensive at 33 times the revised "09 forecast, but sells for less than half book value of $16.30 per share.

Motorola is another investment has-been, with shares down 74% this year to a recent 4.22. Standard & Poor's cut the company's credit rating earlier this month to junk status, and two analysts reversed their 2009 profit outlooks to an expected loss, given the steep decline in demand for Motorola cellphones. Yet, long-term debt equals only 21% of total capital, and the next payment isn't due until November 2010, notes a research report from Broadpoint AmTech, a NewYork firm. Broadpoint has a 12-month price target of $10.

NO STOCK ON OUR LIST HAS FALLEN more than Genworth, the biggest initial public offering of 2004. Shares have crashed 90% in 2008 alone, to 2.58. Genworth sells mortgage insurance, annuities and reverse mortgages, which act as home-equity loans for seniors. Profits have been hurt by loan defaults, scarce credit and investment losses, but fees from annuity and investment-advisory businesses should put a floor under earnings. Profits peaked in 2007 at $3.07 a share; analysts are projecting a drop of 35% this year, and a gain of about 5% next year.

Among other tech and telecom names, software producer Compuware is down 30% this year, compared with a 45% drop for the application-software sector. Compuware, which trades around $6 and operates on a fiscal year, could generate earnings of 57 cents a share for the 12 months ending March 2009, up 6% from fiscal 2008's results. It could generate free cash flow of 82 cents a share, according to Thomson Reuters.

Jabil Circuit, which reports quarterly earnings this week, could see profits jump 4% for the fiscal year ending in August, to $1.16 a share. Analysts are penciling in $1.36 for fiscal "10. Jabil, based in St. Petersburg, Fla., serves various end markets, and its customers include Cisco Systems, IBM and Nokia. The shares are down about 55% this year, to 6.81, and sell for six times "09 estimates.

Analysts expect Tellabs, another company on our list, to boost 2009 earnings by only a penny a share, to 19 cents. Of greater comfort: The company hasn't a smidgen of long-term debt. Tellabs' shares have fallen 40% this year, to a recent $3.91 apiece. The Naperville, Ill.-based outfit has been hurt by the weak market for telecom equipment.

THANKFULLY, AS A RECENT New Yorker cartoon put it, there are still people funneling retirement money into double lattes. Not that it's helped Starbucks, whose stock has fallen 53% this year, to about 9.50. Barron's penned a positive piece on the Seattle company in September ("Something Good Is Brewing," Sept. 29, 2008), when the shares were at 15, and we continue to applaud steps management is taking to boost sales and profits.

But folks aren't spending their 401(k) money on chicken, to judge from Tyson Foods' nosedive, to around $7 a share from about 19.50. Yet, even as rival Pilgrim's Pride struggles in bankruptcy court, Tyson expects higher earnings in fiscal "09 and "10. The fiscal year ends in September.

Airline shares have been pummeled of late, including Southwest Airlines, which is down about 35%, to $7 and change. But next year's earnings could rally 50%, according to analysts, and the company's balance sheet looks healthy. Ditto for Boston Scientific, which faces harsh competition in its bread-and-butter business, cardiac stents, but still expects to show profit growth in 2009.

The Bottom Line

Eastman Kodak, Motorola, Starbucks and Southwest Airlines are just some of the forsaken stocks that could surprise investors by rallying in the year ahead.

To be sure, some of the stocks that made our list -- like Interpublic -- look riskier than those that missed it by a whisker -- like
Time Warnertwx -0.4522840343735866%Time Warner Inc.U.S.: NYSEUSD88.04
-0.4-0.4522840343735866%
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Volume (Delayed 15m)
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2229348AFTER HOURSUSD88.04
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Volume (Delayed 15m)
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214307
P/E Ratio
21.774831816383063Market Cap
72597959932.1918
Dividend Yield
1.5901862789641072% Rev. per Employee
1081370More quote details and news »twxinYour ValueYour ChangeShort position
(TWX). Analysts are still expecting Interpublic to post a one-cent gain in earnings in 2009, which is shaping up as a killer year for advertising spending. Time Warner fell off the list because Wall Street expects earnings to decline next year, but the shares look cheap at 10 times "09 estimates of $1.06 a share.

Harry "Hersh" Cohen, co-manager of Legg Mason Partners Appreciation Fund, ignored Wall Street's 2009 estimates when he screened this fall for $10 stocks. Cohen advises buying a basket of bargain-priced shares, since some might quintuple and some double, and "you can't predict which ones will go out of business."

We can't, either. But at least the average stock on our list costs less than two lattes.